Making sense (and, sometimes, nonsense) out of Current News, Issues, Politics

Monday, August 1, 2016

Was the Weak 2nd Quarter Economic Growth, Even Weaker?

Last Friday, it was reported, that the economy -- in terms of Gross Domestic Product (GDP) -- grew at an anemic 1.1% in the Second Quarter of 2016. The consensus projection was for 2.6% growth.

In addition, that same report said that the growth for the Fourth Quarter of 2015 was downgraded from 1.4% to just 0.9%, and growth for the First Quarter of this year was knocked down from 1.1% to 0.8%. All together, average for the last three quarters was just slightly over 0.9%. To show how bad that is, from 1790 to 2000, the average GDP growth was 3.79%.

It was also reported that consumer spending for the last quarter, was up 4.2%; the only positive part of the report and probably the only reason there was any growth at all. However, I find it difficult to believe that there was such a strong consumer spending number when, in another series of reporting, retail sales have been trending downward since 2011 and are currently below 3%.

Click On Image To Enlarge - Black Line is Trend

Simply, you can't have retail sales below 3%, and then, somehow, have a surprising 4.2% surge in consumer spending. This makes no sense and this is why I believe the lousy 1.1% growth is even weaker than stated. In fact, the quarter may have actually had negative growth.